Chapter 9

Question 1

Amounts due from customers for credit sales; backed by the customer’s general credit standing.

Answer 1

Accounts receivable

Question 2

Measure of both the quality and liquidity of accounts receivable; indicates how often receivables are received and collected during the period; computed by dividing net sales by average accounts receivable.

Answer 2

Accounts receivable turnover

Question 3

Process of classifying accounts receivable by how long they are past due for purposes of estimating uncollectible accounts.

Answer 3

Aging of accounts receivable

Question 4

Contra asset account with a balance approximating uncollectible accounts receivable; also called Allowance for Uncollectible Accounts.

Answer 4

Allowance for Doubtful Accounts

Question 5

Procedure that (a) estimates and matches bad debts expense with its sales for the period and/or (b) reports accounts receivable at estimated realizable value.

Answer 5

Allowance method

Question 6

Accounts of customers who do not pay what they have promised to pay; an expense of selling on credit; also called uncollectible accounts.

Answer 6

Bad debts

Question 7

Method that records the loss from an uncollectible account receivable at the time it is determined to be uncollectible; no attempt is made to estimate bad debts.

Answer 7

Direct write-off method

Question 8

Charge for using money (or other assets) loaned from one entity to another.

Answer 8

Interest

Question 9

Entity who signs a note and promises to pay it at maturity.

Answer 9

Maker of the note

Question 10

Prescribes expenses to be reported in the same period as the revenues that were earned as a result of the expenses.

Answer 10

Matching (or expense recognition) principle

Question 11

states that an accounting standard can be ignored if the net impact of doing so has such a small impact on the financial statements that a reader of the financial statements would not be misled.

Answer 11

Materiality Principle

Question 12

Date when a note’s principal and interest are due.

Answer 12

Maturity date of a note

Question 13

The amount to be paid to the holder of a financial obligation at the obligation’s maturity.

Answer 13

Maturity Value of a Note

Question 14

Entity to whom a note is made payable.

Answer 14

Payee of the note

Question 15

Amount that the signer of a note agrees to pay back when it matures, not including interest.

Answer 15

Principal of a note

Question 16

Written promise to pay a specified amount either on demand or at a definite future date; is a note receivable for the lender but a note payable for the lendee.

Answer 16

Promissory note (or note)

Question 17

Expected proceeds from converting an asset into cash.

Answer 17

Realizable value